New York, Dresden share quest to snag AMD microchip plants

Former Senate Majority leader Joe Bruno gives the thumbs up as he sits beside Kay Stafford and former Gov. George Pataki at the groundbreaking for GlobalFoundries in Malta in July.
(TOM KILLIPS file photo/The Saratogian)

MALTA -- No one knows exactly what will happen when GlobalFoundries reaches its full manufacturing capacity in 2012, but the men and women who worked to make the plant's construction a reality are hoping that it will be at least as successful as a related facility in the German city of Dresden.

When economic development officials first began talking to Advanced Micro Devices Inc. about the possibility of building a plant in New York, the company already had existing facilities in Sunny Vale, Calif., Austin, Texas, and Dresden, located in the German state of Saxony.

Earlier this year, when AMD spun off GlobalFoundries to serve as a manufacturer for AMD's products, as well as those of other companies, the new company took over AMD's Dresden facility and dubbed it "Fab 1." The Malta facility will be "Fab 2."

Years earlier, as would happen later in the Capital Region, Saxony saw the powerful possibility represented by investing in micro-technology, and worked to bring AMD to the region by creating a package of incentives. AMD opened its plant there in 1998.

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"Microelectronics, as a technology of the future, has been a focus of Saxon subsidy policy since the early 90s," wrote Lea Mock, an official with the Saxon State Ministry for Economic Affairs and Labor, in an e-mail to The Saratogian.

Although laws in Germany require that subsidies provided by the government to corporations be kept confidential, Mock noted that the microchip industry in Saxony has received

13 billion euros in subsidies as a whole, with 1.2 billion euros coming from the state government.

Mock said the investment has paid off for Saxony. "Silicon Saxony," the name given to Dresden's microelectronic cluster, consists of 270 companies that work in fields related to microprocessors. In all, companies in the cluster employ 35,000 people. The cluster generates 4 billion euros in economic activity each year.

Just as leaders in Saratoga County and the Capital Region have hailed the new Malta plant as a sign of this area's arrival on the stage of modern manufacture, Mock called the Dresden facility a "lighthouse," noting that it continues to have a stabilizing effect on the whole region.

"From 1996 to 2008, AMD invested over $6 billion in Dresden, and GlobalFoundries plan to expand the location significantly in the years to come," Moc wrote. "On the other hand, Saxony provides the company with an excellent economic and cultural environment for successful development."

An equivalent incentive package

With such a positive experience in Germany, and with Dresden willing and eager to host additional chip fabs, Saratoga County faced a challenge to attract AMD's business.

"Knowing that Dresden would be competitive for a second fab, we would have to do at least what they did," said Dennis Brobston, president of the Saratoga Economic Development Corporation, which created the Luther Forest Technology Campus and marketed the facility to AMD.

Incentives designed to attract GlobalFoundries to Malta were provided by New York state, with guidance of multiple state leaders over a period of years, including former Gov. George Pataki, former state Sen. Joe Bruno and current elected leaders, as well as federal representatives.

To compete with Saxony, New York offered AMD a total incentive tax package worth $1.3 billion.

The incentives were broken down into two pieces:

The first is $650 million in tax credits, both on property taxes and on employee credits -- though the company will only be able to keep the credits if it creates, and keeps, at least 1,260 jobs. GlobalFoundries has said that it will employ a 1,400-member work force once the plant reaches full capacity.

The second set of incentives was $650 million in cash.

$500 million is set aside for tooling and building infrastructure, while $150 million is earmarked for investing in research and development projects to be conducted at Luther Forest, Albany's Nanotech Institute, and at IBM's facility in East Fishkill.

The incentive package caught AMD's eye: "At the time, New York was doing a lot of outreach," said Travis Bullard, a former AMD official who now serves as a public affairs officer with GlobalFoundries. "AMD sent a site selection team to upstate New York, and decided that Luther Forest was the ideal spot."

Malta and Dresden: attractive locations

It was more than a simple matter of economics -- Bullard noted that the Capital Region was also attractive for its existing educational institutions and other related industries in the area, including IBM.

The company was also responding to market trends indicating that customers wanted to see a more geographically-diverse production profile.

If economic conditions were ideal for AMD, officials charged with economic development also believe the conditions were ideal for a fast return on the state's investment.

SEDC's Brobston points to one study, conducted by utility provider National Grid, which concluded work done at Luther Forest will make a contribution to the state's economy greater than the incentives paid to it within three years of the plant opening.

Even if Dresden would have liked to see another chip fab built in the city, Brobston noted that he hoped the new facility at Luther Forest will be seen as a partner to GlobalFoundries' existing plants, as well as a model for smart development.

"There's a reason they're in Dresden," Brobston said. "It's a good site with good labor, and an area that wants growth. That's what we want, too."

Dirk Hilbert, deputy mayor of the city of Dresden, wrote that, "GlobalFoundries sees the public as a partner and is supporting important projects in the local community. The local community is generally very open to new technologies, accepts the factory and is proud of having one of the major chip producers in the region."

GlobalFoundries' Bullard said that the company's goal is to continue a tradition of community involvement started in this region by AMD.

"We've had a lot of success in Dresden. It's the same company involved there (that) will be involved in Malta, and there are a lot of community similarities," Bullard said.

A model for growth and planning

In addition to providing a model for the economics surrounding the way to attract a chip fab, German planning schemes, attractive to the industry and local communities, also played a role in shaping the Luther Forest Technology Campus.

"They don't have the same kind of sprawl," Brobston said, explaining that industrial facilities like chip fabs in Germany are surrounded by farm land. Even as Luther Forest fills with ancillary businesses to supply GlobalFoundries, Brobston said the site plan calls for compact growth. Of Luther Forest's 1,400 acres, 800 will remain undeveloped. By planning the green space before construction began, Brobston said the technology campus will avoid a spillover effect seen in some industrial complexes.

Just as Hilbert noted that numerous suppliers have located to Dresden to feed the growing chip manufacturing industry there, Brobston said SEDC expects to see suppliers moving into this area by 2012, when the chip fab ramps up production.

It's no secret that this region is excited to have GlobalFoundries open its doors, just as Dresden considers itself lucky to have a plant there. Taking economics aside, Hilbert hinted that the Capital Region could also see some unexpected benefits.

"Having GlobalFoundries here is, of course, one of the major assets in Dresden. It complements other important industries such as, for instance, tourism, which benefits from the extraordinary beauty and history of the baroque city," wrote Deputy Mayor Hilbert.